Credit Cards

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Believe it or not, there are more than 14 million credit cards in circulation in this country. But if there’s one good thing to emerge from the economic crisis of recent months, people are spending wiser on their cards. For the first time in decades, credit card debt is being paid off.

"We've seen a definite shift towards debit cards as people try to stay away from getting into debt and try to stay out of trouble” says financial analyst Peter Arnold, from Canstar Cannex.

Our love affair with plastic is wearing thin. People are snipping their cards up or at least keeping them in their pockets.

“The people who are sticking with credit cards are downsizing. They're getting rid of the bells and whistles, which they might have originally got the card for, and moving towards a low rate card and just keeping to the basics” adds Peter.

We still owe more than $44 billion on credit cards but the stock market slump and gloomy economy have forced smart consumers to cut back on card spending, return to cash or switch cards to lower interest rates.

Wesley Mission financial counsellor, Elizabeth Terry, sees 15 to 20 people a week desperate to get out of the financial hole their credit spending has dug.

"So if you're just supplementing your income with credit and you're putting things on there that you can afford anyway, then you are going to get into a problem."

“Cash advances are always expensive and there's no interest free debt period on cash advances, so the day you withdraw you'll be hit instantly with interest. So don't use your credit card for cash advances unless it is an absolute emergency" says Mike Jarocki.

Mike Jarocki is editor of Credit Card Finder, an internet comparison service. It's analysed the entire market and come up with the best cards for different incomes and lifestyles.

“We put it into four different groups. People who spend alot on their credit card and can repay it. People who spend alot but can't repay it, have alot of difficulty and need alot of time to repay it. People who don't spend much and can repay it quickly and people who don't spend much but still need alot of time to repay it" says Mike.

Credit Card Finder judged St George's Vertigo Mastercard the best overall performer with an interest rate of 10.99%, a $55 annual fee.

In the low interest department, they like the Bankwest Lite Mastercard
with interest at 9.99% and a $59 annual fee.

Credit Card Latest continued…

“These cards you're paying 7%, 8% less interest than a rewards card so you're giving yourself a rate cut higher than any bank ever would" says Peter Arnold. “Only go for a rewards card if you are spending $2000 or $5000 a month. Basically putting all your spending through that card but paying it off in full.”

The most competitive rewards card for those big spenders is the Citibank Silver card with an interest rate of 19.99%, a $69 annual fee but benefits galore.

And the Citibank Clear Platinum card was voted best value for money, balancing a 10.99% interest rate against perks like 25% discounts at some retailers and travel insurance.

“The fact is using your credit card is the easy way out. It's the first port of call when people run into trouble and people do pay the price on this and pay far more than they need to on debt" says Peter.

And with more than 14 million credit cards being run through machines in this country, banks, financial institutions, grocery chains are coming up with new products everyday.

When it comes to the worst cards, what should people watch out for?

“High interest rates for sure” says Mike. “If your interest rate is over 15%, you really should consider getting a low interest rate card.”

And to entice customers to switch cards, every card on the market now has a transfer balance scheme. A trap for the inexperienced.

"It where's you choose a new card and you transfer your old balance to your new card usually for a low introductory rate. But the problem is if you go and spend on that card before you pay your balance off you'll incur the full interest rate and by the end of the introductory period you'll find yourself with a fresh new debt to worry about” explains Peter.

If you had one tip for people who have to have a credit card what would it be?

“Don’t put anything on that credit card that you don’t have the cash to back it up” answers Elizabeth.

“The simplest thing to remember is its not your money and you do have to pay it back. So think before you spend” advises Peter.

For more information visit the following website:

Credit Card Finder: www.creditcardfinder.com.au
Canstar Cannex: www.canstarcannex.com.au
Wesley Mission Financial Counselling Services: www.wesleymission.org.au

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